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The Elusive Explanation for the Declining Labor Share

Author

Listed:
  • Gene M. Grossman

    (Princeton University and NBER)

  • Ezra Oberfield

    (Princeton University and NBER)

Abstract
A vast literature seeks to measure and explain the apparent decline in the labor share in national income that has occurred in recent times in the United States and elsewhere. The culprits include technological change, increased globalization and the rise of China, the enhanced exercise of market power by large firms in concentrated product markets, the decline in unionization rates and the erosion in the bargaining power of workers in labor markets, and the changing composition of the workforce due to a slowdown in population growth and a rise in educational attainment. We review this literature, with special emphasis on the pitfalls associated with using cross-sectional data to assess this phenomenon and the reasons why the body of papers collectively explains the phenomenon many times over.

Suggested Citation

  • Gene M. Grossman & Ezra Oberfield, 2021. "The Elusive Explanation for the Declining Labor Share," Working Papers 2021-23, Princeton University. Economics Department..
    • Handle: RePEc:pri:econom:2021-23
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    File URL: https://www.nber.org/system/files/working_papers/w29165/w29165.pdf
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    Keywords

    labor share; national income;

    JEL classification:

    • E01 - Macroeconomics and Monetary Economics - - General - - - Measurement and Data on National Income and Product Accounts and Wealth; Environmental Accounts

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